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May 4, 2012 | By | Posted in General News

Week in Review: PA tax talks kick off budget process

By PA Independent
 
HARRISBURG — With the release of April revenue data this week, the scramble to get the Pennsylvania budget completed by June 30 officially has started.
 
Playing into the budget discussion are tax revenue, the state’s growing pension crisis and changes to the corporate tax code that passed the state House this week, but may hold no future in the state Senate.

 
Revenue shows $300 million revenue shortfall
 
Higher than anticipated revenue for April leaves Pennsylvania with a smaller deficit heading into the two months when the new state budget will be hashed out.
 
Though all projections indicate a revenue deficit at the end of the year, the state will be in better shape than Gov. Tom Corbett’s mid-year forecast of $719 million. The slight change of fortune has led to lawmakers calling for increased spending in the proposed fiscal 2012-13 budget, though Corbett urged caution this week.
 
 
The new Independent Fiscal Office projected that the state would be about $300 million in the red when the fiscal year ends.
 
Democrats slammed the governor for underestimating the state’s revenue, but Corbett urged caution because the state is still in a deficit, even if it is a smaller one.
 
House OKs corporate tax changes
 
A state House-approved bill would lower the state’s corporate net income tax from 9.99 percent to 6.99 percent.
 
Passed largely along partisan lines, the measure also closes the so-called Delaware Loophole that allows some companies to avoid paying the corporate tax by establishing subsidiaries in Delaware and other states with low or non-existent corporate taxes.
 
State Rep. Dave Reed, R-Indiana, the bill’s sponsor, said the idea was to improve the climate for all businesses operating in Pennsylvania.
 
The 9.99 percent rate is the highest in the nation, but the loopholes cost the state about $500 million annually, according to the state Department of Revenue.
 
Opponents said the bill did not shut the loophole adequately and gives a tax break to the state’s richest corporations.
 
"These tax cuts will do little to boost the economy but will drain needed resources for education, hospitals and infrastructure in Pennsylvania,” wrote Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, a liberal think tank in Harrisburg.
 
Corbett said on Wednesday that he did not see the corporate tax changes as part of this year’s budget, and the bill’s future in the state Senate is uncertain.
 
Pensions to play big role in upcoming budgets
 
Corbett’s opinion on the state’s public pension system is clear: “We have to fix it. It’s that simple.”
 
Of course, it’s not that simple. The state’s two major public pension systems, the State Employees Retirement System and Public School Employees Retirement System, have an unfunded liability of more than $36 billion.
 
This year, pensions are consuming $1.1 billion of the state’s $27 billion budget. That figure will increase to $1.6 billion next year and more than $4 billion by 2016, according to estimates from the pension systems and the governor's budget office.
 
 
The governor said he was not prepared to recommend any solutions at this time, though he supports a 401(k)-style pension plan.
 
The House State Government Committee on Tuesday discussed several pension bills, including measures that would move all future state workers, teachers and lawmakers into a 401(k)-style defined contribution plan instead of the existing defined benefit plan. Those changes would not address the existing liability, but would reduce future costs.
 
Redistricting commission hears more concerns about revised maps
 
Redistricting crusader Amanda Holt told Pennsylvania’s reapportionment commission Wednesday the revised state House and Senate district plans still contain "excessive divisions on a massive scale" even after the state Supreme Court ordered the commission to redraw the maps with fewer splits.
 
The revised proposals contain about 50 percent fewer divisions, but Holt's analysis showed 32 unnecessary divisions in the state Senate plan and 205 on the new House map.
 
 
Holt testified, along with about two dozen other public officials and residents, at the hearing of the commission, charged with redrawing the state House and Senate districts every 10 years to reflect population shifts shown by the census.
 
The state Supreme Court ruled that the initial redistricting plans were unconstitutional, because too many counties and municipalities were split by districts.
 
Commission member and state Sen. Dominic Pileggi, R-Chester, said the revised plans were based on the guidance to reduce the number of splits, though the Supreme Court did not provide objective requirements.
 
Stimulus delinquents say reports were turned in, but late
 
Eight Pennsylvania entities that received more than $10 million in federal stimulus money failed to complete mandatory quarterly reports showing how the money was spent.
 
The eight recipients — cities, counties, nonprofits and companies in the Keystone State — are listed as non-compliers on the federal website, Recovery.gov, that tracks money through the American Recovery and Reinvestment Act and the projects for which it was used. Those entities failed to file reports by the end of last year's fourth quarter.
 
Those that responded generally told the same story — reports were submitted but deadlines were missed because of technical difficulties and staff turnover.
 
Joan Blaustein, director of urban forestry and ecosystem management for Philadelphia Parks and Recreation, said her organization missed the deadline because an identification code, needed to file electronically, expired.
 
 
Between February 2009 when the stimulus was passed and the end of 2011, ARRA directed more than $9.4 billion to Pennsylvania recipients through more than 8,300 grants, loans and government contracts, according to Recovery.gov. A total of 5,869 jobs were “created or saved” through the stimulus at a cost of about $1.6 million per job.
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